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(Printed  for  Private  Distribution.) 


AN   EXAMINATION   OF  SOME  OF  THE   BASES  OF 
CURRENT  ECONOMIC  THEORY. 


VALEUR  POUR  VALEUR  EOALE. 


BY 

SAMUEL    B.    CLARKE, 
32   Nassau   Street,   New  York  City. 


'Xo.]/}M..MKJMi^.:. 

With  the  Writer's  Compliments. 


THE  WBIBEZAHL  PRINT      146  Broadway  N,   Y.      Telephone  7320  Cort. 


AN    EXAMINATION    OF   SOME   OF   THE   BASES   OF 
CURRENT  ECONOMIC  THEORY. 

Valeue  Pour  Valeue  :6gale. 

The  bargain;  is  it  an  equation?  To  make  the 
question  clear,  it  will  be  convenient,  without  at- 
tempting to  define  a  unit  of  property,  to  assume 
that  such  a  thing  exists,  and  that,  at  any  instant 
of  time,  every  separable  item  of  property  embodies 
and  is  measured  by  a  definite  number  of  such 
units.  For  example,  a  coin  may  be  conceived  of 
as  containing  ten  property  units;  suppose  that 
the  owner  exchanges  it  for  another  like  coin  of 
ten  units;  evidently  both  parties  to  the  bargain 
stand,  as  property  owners,  just  where  they  did 
before;  neither  is  made  richer  or  poorer  by  the 
bargain.  Is  this  the  type  of  the  bargains  which 
are  actually  made  in  the  usual  course  of  industry 
and  commerce?  Or  do  those  bargains  generally, 
if  not  universally,  resemble  each  other  in  this; — 
that  the  property  which  each  trader  gets  by  the 
bargain  is  not  equal  to  the  property  which  he 
gives,  but  is  either  more  or  less,  so  that  he  is  in 
some  degree  either  enriched  or  impoverished  by 
the  bargain  itself? 

That  the  question  is  a  fair  one  and  of  import- 
ance from  both  the  scientific  and  the  practical 
standpoints  may  be  apparent  if  we  reflect  a  little 
on  certain  opinions  which  have  considerable  cur- 
rency and  credit.  Mr.  Cannan,  in  his  history  of 
the  theories  of  production  and  distribution  (sec- 
ond edition.  Chap.  1,  Sec.  7),  quotes  Quesnay  for 
the  proposition: — ^^que  le  commerce  n'est  q'un 
echange  de  valeur  pour  valeur  egale  et  que  rela- 
tivement  a  ces  valeurs  il  n^y  a  ni  perte  ni  gain 


•  •  • 


•  ••  •    »  , 


«    1 


enfre  les  contractants^^ ;  and  says  himself; — ^'of 
course  exchange  in  itself  is  no  creation  of  wealthy 
and  the  things  which  are  exchanged  for  each 
other  are  for  the  moment  of  equal  valueJ'  Have 
these  opinions  ever  been  challenged?  The  present 
writer's  impression  is  that  they  stand  in  the  rela- 
tion of  axioms  or  necessary  assumptions  to  the 
prevalent  theories  of  value  and  wealth  distribu- 
tion. Yet,  on  their  face  they  commingle  two 
distinct  ideas,  the  truth  of  one  of  which  is,  indeed, 
evident,  but  of  the  other  far  from  being  so.  It  is 
evident  that  bargains,  being  operative  as  transfers 
of  property  at  a  single  instant  of  time,  do  not  and 
cannot  increase  or  diminish  the  quajLtity  of  prop- 
erty existing  at  that  instant ;  but  it  is  not  evident 
that  a  bargain  does  not  increase  the  property  of 
one  of  the  contracting  parties  and  diminish  that 
of  the  other.  A  transfer  without  consideration 
certainly  does  not  increase  or  diminish  the  stock 
of  existing  property,  but  as  certainly  it  makes 
the  donor  poorer  and  the  donee  richer.  Why 
may  it  not  be  that  an  exchange  of  properties 
works  similarly?  Against  what  possibly  may  be 
the  unconsciously  sophisticated  opinions  of  Ques- 
nay  and  Cannan  we  may  set  the  practical  wisdom 
of  two  well  known  stories.  Esau  bartered  his 
birthright  to  Jacob  for  a  mess  of  pottage;  mani- 
festly the  trade  was  unequal,  Esau  losing  thereb^y 
and  Jacob  gaining  in  property.  So,  in  Franklin^s 
fable,  the  youth  who  traded  his  fortune  of  one 
hundred  pounds  for  a  horse,  and  the  horse  for  a 
cow,  and  the  cow  for  a  sheep,  and  the  sheep  for 
a  goose,  and  the  goose  for  a  chicken,  and  the 
chicken  for  a  penny  whistle,  lost  in  property  by 
each  trade  and  the  counter-bargainor  gained. 
Are  these  cases  peculiar  and  exceptional?  They 
may  be  so  in  respect  of  the  degree  of  variation 
from  equality;  but  are  they  peculiar  and  excep- 


tioiial  in  respect  of  the  fact  of  variation,  much 
or  little?  If  bargains  ordinarily  were  equal  in 
respect  of  the  properties  transferred,  why  should 
not  men  who  spend  their  lives  in  trading  find 
themselves,  as  property  owners,  at  the  end  sub- 
stantially where  they  were  at  the  l)eginning,  no 
richer  and  no  poorer?  Because  (as  Cannan's 
comment  on  Quesnay  suggests)  of  changes  in 
the  quantity  of  their  property  during  the  inter- 
vals between  bargains?  That  is  a  conceivable 
answer;  is  it  the  true  answer?  Evidently  some 
traders  grow  richer  and  richer  and  others  poorer 
and  poorer;  is  this  due  entirely  to  changes  in  the 
quantity  of  their  property  in  the  intervals  be- 
tween bargains  or  partly  at  least  to  bargains  being 
themselves  causes  of  gain  to  some  and  of  loss  to 
others?  It  may  be  dif^cult,  or  impossible,  to 
separate  bargain  or  instantaneous  gains  and 
losses  from  time  gains  and  losses,  but  this  in 
itself  is  not  a  sufficient  reason  for  doubting  the 
existence  of  instantaneous  gains  and  losses;  we 
believe  that  there  are  dark  stars,  although  we  are 
unable  to  see  them. 

It  is  not  the  writer's  purpose,  on  this  occasion, 
to  attempt  to  deal  judicially  with  the  question 
which  has  been  stated,  but  rather,  by  advocacy 
of  inequality,  to  show  that  equality  cannot  prop- 
erly be  assumed,  and  that  anybody  who  asserts 
it  or  relies  on  it  ought  first  to  prove  it. 

I.  Some  typical  bargains;  bread  for  money; 
flour  for  money;  wheat  for  money.  Let  us  begin 
the  consideration  of  the  question  with  an  exami- 
nation of  the  following  series  of  ordinary  trans- 
actions:  the  raising  of  wheat  by  a  farmer,  and 
the  sale  for  money  of  so  much  of  it  as  he  does 
not  want  for  food  or  seed  by  him  to  a  miller; 
the  sale  of  some  of  the  same  wheat,  in  the  form  of 
flour,  for  money  by  the  miller  to  a  baker;  the  sale 


4 


of  some  of  the  same  flour,  in  the  form  of  a  loaf 
of  bread,  for  a  dime  by  the  baker  to  a  consumer; 
and  finally,  the  eating  of  the  loaf  by  the  consumer. 
The  result  of  all  these  transactions  is  a  loss  of 
property;  the  loaf,  once  existing,  has  disappeared, 
like  evaporated  water;  it  is  gone,  and  no  other 
item  of  property  has  taken  its  place.  The  con- 
sumer, indeed,  has  had  a  momentary  pleasure 
and  has  maintained  for  a  few  hours  his  life  and 
health;  but  pleasure,  health  and  life  are  not 
property.  The  consumer  has  lost  the  loaf;  is  his 
loss  of  property  limited  to  the  loaf?  This  de- 
pends upon  whether  the  loaf,  and  the  dime  which 
the  consumer  gave  to  the  baker  for  it,  were 
equal  as  property.  Immediately  after  the  bar- 
gain, and  a«  the  result  of  it,  was  the  consumer, 
then  owning  the  loaf,  richer  or  poorer  than  he 
was  immediately  before  it,  when  he  owned  the 
dime?  Was  the  baker  richer  or  poorer?  Or  was 
there  no  change,  as  to  either  of  them,  in  respect 
of  the  amount  of  property  owned?  There  are 
at  least  two  solid  reasons  for  believing  that  the 
dime  and  the  loaf  were  not  equal;  and  that  the 
baker  gained  in  property  by  thQ  sale  at  the  ex- 
pense of  the  consumer; — > 

First:  In  buying  the  loaf,  as  in  eating  it,  the 
consumer's  dominant  motive  was  hunger,  the  satis- 
faction or  gratification  of  which  has  as  its  neces- 
sary concomitant  the  loss  of  property.  It  was 
a  matter  of  indifference  to  him  whether  the  neces- 
sary and  inevitable  loss  should  begin  and  end 
with  the  eating,  or,  ending  with  the  eating,  should 
begin  with  the  buying.  On  the  other  hand,  the 
baker's  dominant  motive  was  the  desire  of  en- 
richment; to  increase  his  property  (to  make 
money,  as  the  saying  is),  is  what  he  was  in  the 
bakery  business  for.  It  is,  therefore,  obviously 
highly  improbable  that  the  minds  of  the  consumer 


and  the  baker  should  have  met  upon  a  price  for 
the  bread  which  would  not  give  the  baker  a 
property  gain  at  the  expense  of  the  consumer. 

Second:  It  is  a  fact  of  observation  that  imme- 
diately after  the  sale,  or  at  any  time  after  it,  the 
consumer  could  not  ordinarily  sell  the  loaf  again 
for  a  dime,  while  the  baker  could,  if  he  wished  it, 
readily  buy  another  loaf  with  the  dime.  Seldom, 
if  ever,  can  consumers  sell  again  food,  clothing, 
furniture,  jewels,  &c.,  &c.,  for  a  price  equal  to, 
or,  indeed,  much  less  than,  the  price  they  gave. 

Like  the  baker,  the  miller  was  in  business  for 
the  purpose  of  enrichment.  In  the  sale  of  the 
flour  the  motive  of  both  parties  was,  in  a  general 
sense,  the  same,  namely; — enrichment.  But  there 
was  an  important  difference  between  them.  The 
miller  must  accomplish  his  purpose  of  enrichment 
by  the  sale  of  the  flour,  that  being  his  final 
product;  it  was  now  or  never  with  him.  On  the 
other  hand,  the  proximate,  efficient  motive  of  the 
baker  was  to  obtain  material  for  bread;  foresee- 
ing his  profitable  sale  of  bread  to  the  consumer, 
he  could  afford  some  loss  of  property  in  buying 
the  flour  to  be  used  as  material  for  bread.  Prob- 
ably, therefore,  the  sale  of  the  flour  resulted  in  an 
immediate  property  gain  to  the  miller  and  an 
immediate  property  loss  to  the  baker.  The  same 
difference  existed  in  the  case  of  the  sale  of  wheat. 
The  farmer  must  gain  in  property,  if  at  all,  by 
that  very  sale,  or  another  like  it,  while  the  miller, 
foreseeing  his  profitable  contract  with  the  baker, 
could  afford  a  loss  in  that  bargain.  Probably, 
therefore,  the  farmer  gained  and  the  miller  lost. 

How  much  was  the  gain  and  loss  of  property 
by  these  bargains?  Without  a  standard  of  com- 
parison and  a  unit  of  property  and  measurements 
of  the  specific  quantities  of  the  material  things 
exchanged,  we  cannot  answer  this  question  with 


6 


precision.  But  we  can  see  some  things.  The 
consumer's  loss  in  property  in  buying  the  loaf 
must  have  been  large  enough  to  giye  the  baker 
a  net  gain  on  his  two  bargains,  and  the  baker's 
loss  must  have  been  large  enough  to  give  the 
miller  a  net  gain  on  his  two  bargains,  and  the 
miller's  loss  must  have  been  large  enough  to  give 
the  farmer  his  gain;  that  is  to  say,  the  consumer's 
loss  equalled  the  gains  of  the  baker,  the  miller 
and  the  farmer;  that  is  to  say  again,  the  con- 
sumer's loss  must  have  been  relatively  quite  large, 
and  he  may,  indeed,  have  lost  more  property  in 
buying  the  loaf  than  in  eating  it.  On  the  other 
hand,  in  the  €ase  of  each  of  the  three  bargains 
there  were  forces  at  work  which  tended  to  limit 
the  gain  and  loss,  although  their  operation 
stopped  short  of  reducing  the  gain  and  loss  to 
zero  at  the  point  of  equality.  The  consumer  who 
bought  and  ate  the  loaf  contemplated,  and  was 
reconciled  to,  some  loss  of  property,  and  was 
wholly  indifferent  whether  the  loss  should  come 
to  him  wholly  in  eating  or  partly  in  eating  and 
partly  in  buying;  but  he  was  not  indifferent  to 
the  total  of  his  loss  of  property,  and  had  this 
total  appeared  to  him  of  more  importance  than 
complete  satisfaction  of  his  hunger,  he  could  and 
would  have  put  himself  on  short  rations.  This 
power  of  his  tended  to  keep  down  the  price  which 
he  would  pay  for  the  loaf,  but  it  ceased  wholly 
to  operate  at  the  point  where,  in  his  mind,  full 
satisfaction  of  his  hunger  over-balanced  the  loss 
of  property  involved  in  paying  the  price.  Again, 
bread  is  a  perishable  thing,  and  in  order  to  ac- 
complish the  purpose  of  enrichment  the  baker 
must  sell  it  within  a  rather  short  time  after  it 
is  made  or  it  will  spoil  on  his  hands.  This  tended 
to  prevent  him  from  setting  the  price  too  high, 
but  it  ceased  to  operate  as  a  force  on  his  mind 


before  reducing  the  price  to  a  point  where  he 
would  make  no  gain  in  property,  for  otherwise 
he  would  not  have  continued  in  business.  So  also 
the  competition  of  other  bakers  tended  to  prevent 
him  from  setting  the  price  too  high;  but  this 
force  also  ceased  to  operate  before  reducing  the 
price  to  a  point  where  there  was  no  property  gain 
to  the  baker  in  the  sale  of  the  loaf,  for  bakers 
generally  are  in  business  for  the  same  thing, 
namely; — self -enrichment,  and  their  competition 
must  cease  *  at  a  point  which  will  enable  this 
motive  to  be  accomplished  or  else  they,  or  some 
of  them,  must  go  out  of  business;  and  the  fact 
that  the  baker  in  the  supposed  case  was  in  busi- 
ness indicates  that  the  competition  had  ceased  to 
reduce  the  price  before  it  reached  a  point  where 
there  was  no  property  gain. 

The  three  bargains  which  we  have  examined 
are  widely  typical.  The  industry  of  the  civilized 
world  which  supplies  us  with  the  necessaries,  com- 
forts, conveniences  and  luxuries  of  life  is  organ- 
ized in  groups  of  men,  and  the  organization  is 
such  that  the  finished  product  of  one  group  be- 
comes the  material  for  the  next  group,  and  the 
finished  product  of  that  group  the  material  for 
the  following  group,  and  so  on,  till  material 
things  are  at  last  completely  adapted,  in  form, 
composition  and  location,  to  human  use,  where- 
upon they  become  the  property  of  consumers  and 
are  used.  From  the  existence  of  this  organiza- 
tion, and  its  continuance  throughout  a  consider- 
able period  of  time,  we  may  infer  that  the  motives 
and  purposes  of  the  men  in  each  group,  who  are 
able  to  continue  there,  are  in  fact  accomplished; 
for  otherwise  it  would  seem  that  the  groups,  and 
the  whole  organization,  must  necessarily  break 
up.  It  seems,  therefore,  legitimate  to  infer,  fur- 
ther, that  what  is  true  of  these  three  bargains 


8 


is  true  generally  and  to  say  that,  as  a  rule, 
exchanges  of  property  in  the  regular  course  of 
industry  and  commerce  are  not  equal,  but  result 
in  a  loss  of  property  (probably  a  great  loss)  to 
consumers,  and  a  gain  of  property  (probably  a 
great  gain)    to  producers. 

What  becomes  of  the  gains  of  producers?  By 
the  word  producers^  as  here  used,  must  be  under- 
stood only  the  comparatively  few  men  who  are 
the  owners  of  intermediate  and  final  products, 
and  whose  judgment  and  will,  therefore,  are  effi- 
cient in  determining  the  contracts  governing  the 
disposition  of  intermediate  and  final  products. 
These  men  are  themselves  consumers,  and,  to  the 
extent  that  they  make  bargains  for  consumption, 
they  will,  for  the  reasons  stated,  be  losers.  In  this 
way  they  lose  a  part  (probably  a  small  part)  of 
their  gains.  What  'becomes  of  the  residue?  In 
the  processes  of  production  it  is  necessary  for 
producers  to  make  a  great  variety  of  contracts; 
they  must  hire  laborers,  they  must  borrow  money, 
they  must  buy  tools  and  implements,  they  must 
rent  land  and  buildings,  &c.  Unless  these  con- 
tracts were  also  ordinarily  unequal,  the  riches 
of  producers  would  doubtless  increase  with  amaz- 
ing rapidity.  Just  as  the  producer  of  the  final 
product,  looking  forward  to  his  profitable  con- 
tract with  the  consumer,  loses  in  the  purchase  of 
the  material  for  the  final  product,  so,  doubtless, 
all  his  other  contracts,  and  the  like  contracts  of 
intermediate  producers,  with  laborers,  landlords 
and  lenders,  &c.,  are  unequal,  and  most  of  pro- 
ducers^ gains  go  to  the  reimbursement  of  losses 
incurred  in  this  way.  The  laborers,  the  lenders 
and  the  landlords  are  consumers,  and,  so  far  as 
they  make  consumption  bargains,  they  lose  the 
gains  which  come  to  them  from  their  contracts 
with  producers.     It  is  not,  however,  necessarily 


9 

true  or  even  probable  that  in  this  way  the  totality 
of  producers'  gains  is  offset  by  consumption  losses. 
Between  a  gaining  contract  and  a  losing  contract 
there  is  usually  an  opportunity  for  saving.  The 
consumption  desires  of  men  are  elastic,  and,  by 
limiting  the  gratification  of  them,  it  is  possible 
to  become  permanently  enriched  through  bargain 
gains,  and  many  men  doubtless  avail  themselves 
of  this  power  of  limitation.  We  may  say,  then, 
that  producers'  gains  are  largely  offset  by  con- 
sumption losses,  but  that  a  considerable  part  of 
them  is  saved,  and  thereby  some  men  are  more 
or  less  permanently  enriched. 

II.  Elements  of  property;  its  utilities  for 
the  owner;  standards  of  measurement;  property 
power.  We  may  continue  the  consideration  of 
the  question  by  attempting  somewhat  greater 
definiteness  of  thought  and  words.  By  analyzing 
the  complex  idea  of  property  so  as  to  identify  the 
entities  or  realities  which  are  represented  by 
its  component  ideas,  we  may  be  able  to  discern 
clearly  what  its  utilities  are,  and  then,  by  analyz- 
ing and  classifying  the  desires  to  which  those 
utilities  minister,  we  may  be  able  to  find  out 
whether  traders  use  a  single  standard  or  diverse 
standards  in  trading,  and  what  effect  upon  the 
measurements  of  bargains  diversity  may  have. 

Property,  as  the  word  is  ordinarily  used,  usual- 
ly, though  not  always,  implies  the  existence  of 
a  specific  material  thing,  which  is  adapted  or 
adaptable  to  some  human  use,  such  as  a  horse, 
a  hen,  a  parcel  of  land,  a  building,  a  coat,  a 
bracelet,  an  axe,  a  billet  of  steel,  a  basket  of 
wheat,  a  bale  of  cotton,  &c.,  &c.  From  this  point 
of  view,  property  appears  to  ^be  a  material  entity, 
and  such  is  the  common  understanding  of  it.  We 
impute  to  property  a  situs  in  space.  We  classify 
it  as  movable  and  immovable.    We  talk  of  the  pro- 


10 

duction,  transportation  and  destruction  of  prop- 
erty. We  say  that  we  buy  and  sell  lands,  cattle, 
coal,  &c.  The  price  of  a  loaf  of  bread,  the  value 
of  a  ship,  are  common  expressions.  But  all  these 
are  mere  fashions  of  speaking,  convenient,  and, 
for  many  purposes,  harmless  ellipses,  rather  than 
accurate  statements  of  fact.  Professor  Wash- 
burne,  in  his  familiar  idiom,  used  to  say  to  his 
law  students; — ^^"You  may  think  somebody  owns 
land.  No  he  don't,  nuther.  Nobody  owns  land. 
All  that  he  owns,  or  can  own,  is  an  estate  in 
land." 

The  word  further  imports  the  existence  at  the 
same  time  of  two  or  more  human  beings  standing 
in  certain  jural  relations  to  each  other  in  respect 
of  some  one  or  more  of  the  material  things  which 
are  adapted  or  adaptable  to  their  use.  If  there 
were  no  human  beings,  or  only  one,  there  would 
be  no  property.  Crusoe,  alone  on  his  island, 
finding  a  nest  of  hen's  eggs,  takes  and  eats  them, 
without  subjective  hesitation  or  external  hin- 
drance or  penalty.  But  a  man  among  men,  find- 
ing eggs,  does  not  eat  or  take  or  disturb  them. 
He  knows  that  some  other  man  owns  the  eggs 
and  has  the  right  to  do  with  them  as  he  pleases, 
and  that  his  duty  to  that  other  man  is  not-to- 
interfere  with  this  right.  His  sense  of  duty,  and 
his  fear  of  what  the  owner  and  other  men  may 
do  to  him,  overpower  his  hunger  and  hold  him 
in  check.  The  thing  that  stops  him  is  property, 
which,  though  invisible,  intangible,  non-existent 
in  space,  is  ordinarily  as  effectual  for  the  purpose 
as  if  it  were  a  wall  of  granite.  From  this  point 
of  view  property  appears  to  be  not  a  material 
but  a  psychic  entity,  consisting  of  the  rights 
against  other  men  which  an  individual  man  has 
in  respect  of  a  specific  material  thing,  and  of  the 
correlative  duties  or  debts  which  those  other  men 


11 


owe  him  in  respect  of  the  same  material  thing. 
The  right  of  the  owner  is  to  use  the  material 
thing  more  or  less  freely  for  a  longer  or  shorter 
period  of  time,  in  accordance  with  his  own  desires, 
judgment  and  will,  and  to  employ  physical  force 
to  prevent  interference  by  other  men  with  such 
nse  by  him  of  the  thing,  and  the  correlative  duties 
or  debts  of  other  men  to  the  owner  are  to  ab- 
stain, severally  and  collectively,  from  any  inter- 
ference, and  to  help  him  with  the  force  of  their 
bodies,  or  otherwise,  to  prevent  any  one  or  more 
of  them  from  interfering  in  such  use  of  the  thing. 

Again,  property,  usually,  though  not  always, 
also  imports  the  idea  that  the  owner  is  free,  at 
his  own  will  and  pleasure,  to  substitute  another 
man  as  owner  in  his  place.  This  is  the  owner's 
right  of  alienation.  He  is  at  liberty  to  transfer 
to  another  man  the  ijiaterial  thing  (or,  speaking 
accurately,  Ms  rights  in  respect  of  the  material 
thing,)  without  conditions,  in  the  form  of  a 
gift,  or  upon  any  condition  he  chooses  to  impose, 
such  as  the  transfer  to  himself  of  some  other 
thing.  He  may  also  divide  his  rights  in  certain 
ways,  and,  keeping  some  of  them  himself,  transfer 
the  others;  so  that  the  full  ownership  of  a  mate- 
rial thing  is  often  distributed  among  two  or 
more  men.  The  entity  represented  by  this  idea 
is  a  psychic  entity,  and  the  processes  of  transfer, 
though  they  may  be  facilitated  and  evidenced  by 
material  things  and  processes,  are  essentially 
psychic  processes.  Gifts  and  exchanges  of  prop- 
erty are  events  which  do  not  occur  in  the  world 
of  space  and  matter,  but  in  the  world  of  mind. 

Again,  property  also  imports  the  idea  of  the 
existence,  deep  down  in  the  feelings  and  opinions 
of  men,  of  a  certain  concord  and  consent,  giving 
rise  to  what  are  variously  known  as  the  jural  or 
the  inherent  or  the  natural  rights  of  men  and  also 


12 

giving  rise  to  powerful  psychic  forces,  which 
control  and  guide  economic  actiyity  in  all  its 
forms,  at  'all  times,  from  the  beginning  of  produc- 
tion to  the  end  of  consumption.  These  forces 
cause  men  to  respect  the  boundary  lines  between 
things  appropriable  and  things  unappropriable, 
and  also  the  boundary  lines  between  the  fields  of 
action  within  which  each  man  is  at  liberty  to 
follow  his  own  feelings,  judgment  and  will,  and 
the  fields  within  which  he  has  no  such  liberty. 
They  do  this,  partly  and  mainly  by  their  direct 
influence  on  individual  men,  and  partly  through 
the  instrumentality  of  civil  government,  one  of 
whose  functions  is  to  ascertain  exactly  the  true 
location  of  the  boundary  lines  and  to  erect  legal 
boundary  walls  thereon,  and  another  of  whose 
functions  is  to  provide  an  overwhelming  physical 
force  operating  at  all  tim^s,  by  menace  at  least, 
both  as  a  shield  for  the  protection  of  the  liberty 
of  each  man  within  his  own  fields,  and  as  a  sword 
for  keeping  him  out  of  the  fields  of  freedom  of 
other  men.  Thus  we  arrive  at  another  psychic 
element  of  property,  the  element  of  security. 

Finally,  the  property  concept  usually,  though 
not  always,  also  involves  the  idea  of  a  psychic 
force  inherent  in  the  owner  and  controllable  by 
him,  enabling  him,  or  tending  to  enable  him,  to 
influence  the  desires,  judgment  and  will  of  the 
owners  of  other  property  in  the  direction  of 
transferring  to  him  what  they  own,  or  a  part  of 
it,  in  consideration  of  his  transferring  to  them, 
or  one  of  them,  what  he  owns,  or  a  part  of  it. 
This  force  is  an  entity  as  real  as  those  other 
psychic  forces  in  a  man  which  enable  him  to  excite 
pity  or  love  in  other  men,  as  real  as  the  physical 
forces  of  gravity  and  electricity.  The  owner,  by 
virtue  of  his  ownership  of  a  specific  material 
thing,  and  of  his  right  to  transfer  the  ownership. 


IB 

lias  a  power  over  other  men  which  he  would  not 
otherwise  have.  For  convenience  we  may  name 
this  force  propcf^ty  power. 

If  this  analysis  does  not  appear  to  be  correct 
on  the  mere  statement  of  it,  we  may,  perhaps, 
make  it  appear  so  by  being  more  concrete  in  cer- 
tain respects.  The  material  things  of  the  world 
which  are  adapted  or  adaptable  to  human  use 
are  divided  into  two  great  classes,  namely; — those 
which  are  and  those  which  are  not  legally  appro- 
priable by  individual  men.  .  Human  beings,  the 
sun's  light  and  heat,  the  air,  the  high  seas,  some 
X)ortions  of  the  land  of  the  world,  are  examples 
of  unappropriable  things.  Other  portions  of  the 
land  of  the  world,  animals  inferior  to  man, 
and  the  severable  fruits  and  products  of 
animals,  land,  sea  and  air,  are  examples 
of  appropriable  things.  The  reasons  for  this 
classification  need  not  now  be  touched,  but  the 
fact  that  the  classification  exists  is  manifest. 
Let  us  compare  one  of  the  appropriable  things 
with  one  of  the  unappropriabh*  things.  The  strip 
of  land  along  the  sea  between  low  and  high  water 
marks,  sometimes  known  as  the  foreshore,  is  not 
legally  appropriable,  and  is  not  property,  but 
the  like  strip  running  inland  from  high  water 
mark  is  legally  appropriable,  and  is  property.  Re- 
garded merely  as  material  things,  these  two  strips 
of  land  do  not  differ  in  any  substantial  way;  they 
are  both  useful  to  man,  they  are  of  the  same 
size,  and  one  is  no  more  scarce  (or  abundant) 
than  the  other.  That  which  makes  one  of  them 
property  is  the  fact  that  some  men  have  exclusive 
rights  against  other  men  in  respect  of  it,  and 
that  which  prevents  the  other  from  being  property 
is  the  fact  that  no  man  has,  or  (without  a  change 
of  law)  can  have,  any  exclusive  rights  against 
other  men  in  respect  of  it.     This  contrast  seems 


14 

to  show  clearly  that  the  essence  of  property  is  the 
psychic  entity,  exclusive  right, — an  idea  which 
becomes  still  clearer  when  we  think  of  those  kinds 
of  property  which  do  not  have  relation  to  any 
specific  material  thing;  e.  g.,  money  debts,  public 
offices,  some  franchises,  copyrights,  patents  for 
invention.  Again,  compare  a  parcel  of  the  in- 
land strip,  which  is  owned  in  fee  by  somebody, 
with  a  like  parcel  of  the  foreshore,  which  is 
owned  by  nobody.  In  the  one  case  the  existence 
of  the  force  which  we  have  called  property  power 
is  manifested,  and  in  the  other  it  is  not  mani- 
fested. The  owner  of  the  inland  parcel,  by  offer- 
ing to  transfer  his  exclusive  rights,  can  persuade 
some  other  man  to  transfer  to  himself  some  other 
thing  which  he  may  desire  more  than  the  land, 
but  no  man  can  obtain  what  another  owns  by 
offering  to  do,  or  doing,  anything  whatever  in 
respect  to  the  foreshore  parcel.  This  comparison 
seems  clearly  to  make  it  evident  that  property 
power  does  not,  like  gravity,  electricity,  chemical 
affinity,  and  other  physical  forces,  inhere  in,  or 
emanate  from,  material  things,  but  is  a  psychic 
/  "^  '  force  inherent  in  the  personality  of  the  owner, 
just  as  his  power  to  excite  pity  or  love  in  other 
men  inheres  in  him.  Again,  compare  the  owner 
of  the  fee  in  a  parcel  of  the  inland  strip  with  the 
lessee  for  a  year,  under  an  ordinary  lease,  of  an- 
other like  parcel  of  the  inland  strip.  In  the  case 
of  the  fee  owner  the  existence  of  property  power 
is  manifested;  by  sale  or  exchange  he  can  obtaiu 
other  property  which  he  may  desire  more  than 
the  land.  But  the  existence  of  property  power 
is  not  manifested  in  the  case  of  the  lease  owner; 
he  cannot,  by  sale  or  exchange,  obtain  anything 
else  which  he  may  desire  more  than  the  leased 
land.  The  two  cases  do  not  differ  at  all,  so  far 
as  the  two  parcels  of  land  are  concerned.     They 


15 

do  not  differ  substantially  so  far  as  the  exist- 
ence of  property  in  respect  to  each  parcel  of  land 
is  concerned;  the  lease  owner  has  exclusive  rights 
shorter  in  duration  and  narrower  in  »cope  than 
those  of  the  fee  owner,  but  quite  as  real;  he  is 
also  subject  to  certain  burdens  which  the  fee 
owner  is  free  from,  such  as  the  payment  of  rent; 
but  such  differences  as  there  are  do  not  account 
for  the  fact  that  the  lease  owner  has  no  property 
power  while  the  fee  owner  does  have  it,  though 
they  would  be  quite  sufficient  to  account  for  the 
power  of  the  fee  owner  being  greater  than  the 
power  of  the  lease  owner,  if,  in  the  case  of  the 
latter,  the  power  existed  at  all.  What,  then,  is 
the  difference  between  the  two  cases  which  may 
account  for  the  fact  that  in  one  property  power 
exists  and  in  the  other  it  does  not  exist?  The 
only  difference  is  that  the  fee  owner's  exclusive 
rights  are  alienable,  while  under  an  ordinary  lease 
the  lessee's  exclusive  rights  are  inalienable.  An- 
other example  of  the  effect  of  alienability  may  be 
found  in  the  fact  that  property  in  an  army  com- 
mission does  not  now  give  an  army  officer  any 
property  power,  the  commission  now  being  in- 
alienable, but  that  formerly  it  did  give  him 
property  power,  the  commission  then  being  alien- 
able. Another  good  example  is  presented  by  the 
contrast  between  a  life  annuity  granted  by  an 
insurance  company  and  a  life  pension  granted 
by  the  government;  both  are  property,  but  the 
former  is  alienable  and  its  owner  has  property 
power,  while  the  latter  is  inalienable  and  the 
owner  does  not  have  property  power.  Again,  by 
the  law  of  New  York,  lands  held  in  trust  are  in- 
alienable; pending  the  trust,  such  lands  give 
their  owners  no  property  power.  Property  power, 
like  electricity,  is  a  force  which  manifests  its  exist- 
ence only  under  certain  conditions  and  arrange- 


16 

meiits.  It  does  not  exist  in  the  case  of  legally 
unappropriable  material  things,  no  matter  how 
useful  to  man  or  how  scarce  or  abundant  the;y 
may  be.  It  does  not  exist  in  respect  of  legallj' 
appropriable  and  appropriated  material  things 
unless  the  exclusive  rights  of  the  owner  are  alien- 
able. We  may  believe,  therefore,  that  alienable 
exclusive  rights  are  some  of  the  efficient  and  in- 
dispensable causes  of  its  existence. 

This  analysis  is  far  from  being  exhaustive,  but, 
if  it  correctly  classifies  the  elements  of  property, 
omitting  none  that  is  essential,  it  will  serve  the 
present  purpose.  Is  any  essential  element  omit- 
ted? Value?  In  the  whole  world  of  All-Being 
does  there  exist  any  entity  or  reality,  other  than 
property  power,  which  can  be  denoted  by  this 
word,  when  used,  as,  for  example,  Quesnay  uses 
it,  in  the  sentence  quoted  at  the  beginning  of 
this  paper?  Value  in  exchange?  Does  that 
phrase  denote  anything  else  than  a  measure,  by 
some  standard,  of  property  power?  Value  in  use? 
That  is  merely  a  measure,  by  some  standard,  of 
the  ultility  of  a  material  thing  for  any  purpose  to 
which  the  material  thing,  as  such,  is  adapted, — 
is  it  not?i 

iThat  economists  are  in  error  in  regarding  scarcity  as  one 
of  the  efficient  causes  of  the  existence  of  property  power  or 
value,  may  further  be  made  to  appear  as  follows: — Among 
the  most  scarce  of  useful  things  are  the  masterpieces  of  Italian 
art.  Suippose  that  the  Italian  Government  were  to  extend  the 
poliicy  wihich  now  prohibits  the  exportation  of  such  master- 
piieces  to  the  point  of  forbidding  the  owners  to  sell  or  trans- 
fer ithem  to  any  one;  evidently  the  owners  would  no  longer 
have  any  property  power  by  virtue  of  their  oiwnership  of  the 
masterpieces  or,  what  is  the  same  thing  in  meaning,  the 
masterpieces  would  no  longer  have  value.  On  the  other  hand, 
one  of  the  most  abundant  of  useful  things  is  the  air.  It 
would  be  a  simple  matter  to  draft  a  statute  which,  if  enacted 
and  ertforced,  would  result  in  the  alienable  appropriation  of  the 
air.  Were  this  done,  the  owners  of  air  would  certainly  have 
property  power  or,  what  is  the  same  thing  in  meaning,  the  air 


17 


With  this  analysis  in  mind,  we  may  see  that, 
for  the  owner,^  property  has  two  utilities  which 
are  as  wide  apart  as  the  color  and  the  weight 
of  a  material  thing,  and  which  may,  for  conven- 
ience,   he    distinguished    as    consumption    utility 

would  have  value.  Relative  abundance  and  scarcity  are  causes 
of  the  variability  of  'property  power  or  value,  but  not  of  the 
existence  of  property  power  or  value. 

IFor  all-of-us,  for  'mankind,  property  has  other  utilities  which 
w^ould  have  to  be  emphasized  if  the  question  were  on  the 
economic  and  ethical  justification  of  property.  The  supposed 
principle  of  property — to  the  producer  the  product  of  right 
belongs — which  is  implicitly  assumed  by  the  socialist,  Karl  Marx, 
and  by  many  individualist  econom/ists,  and  which  is  expressly 
affirmed  by  J.  S.  Miill,  in  the  second  book  of  his  Principles  of 
Political  Economy,  and  by  Henry  George  in  Progress  and 
Poverty,  and  by  Professor  J.  B.  Clark,  in  the  'lay-out  chapter  of 
his  Distribution  of  Wealth,  appears  to  the  writer  to  be  the 
antipodes  of  the  truth.  Speaking  practically;  this  pretended 
principle  is  not  a  workable  determinant  of  the  kind  of  disputes 
and  quarrels  which  actually  arise  among  men.  Speaking  ethic- 
ally; it  cannot  be  co-ordinated  with  several  of  the  recognized 
principles  of  justice,  and,  in  particular,  it  flatly  denies  the  prin- 
ciple oif  liberty  and  the  sub-principle  of  freedom  of  contract. 
Speaking  economically;  if  there  is  to  be  economic  thrift  property 
must  precede,  not  follow,  production;  witness  what  happens  (i) 
at  the  gold  diggings  till  the  place  where  each  man  is  to  work  is 
first  marked  out  and  made  secure  to  him;  (2)  at  the  oyster  beds 
till  the  stakes  are  set;  (3)  in  the  matter  of  squatter  settlements 
on  the  public  lands;  and  (4),  above  all,  witness  the  blotter  lifelong 
quarrels  which  often  arise  between  the  sons  and  daughters  of 
the  same  father  and  mother  who  have  been  left  tenants-in- 
common  of  land  and  have  triied  too  long  to  get  on  without  a 
partition.  Tihe  mentally  conceivable,  but  practically  impossible, 
alternative  to  private  property  is  a  militao-y  socialistic  organiza- 
tion which,  by  physical  force,  compels  the  individual  man  to 
work  undeir  the  orders  of  an  officer  and  to  abide  the  decision 
of  an  officer  as  to  what  his  fair  share  of  produce  is.  This  wouM 
deprive  everybody  of  that  measure  of  liberty  to  w^hioh  all  of  us, 
old  and  young,  rich  and  poor,  high  and  low,  have  been  so  accus- 
tomed from  earliest  infancy  that  it  is  now  a  part  of  our  sub- 
conscious and  (instinctive  nature,  and  all  or  most  of  us  stand 
ready  to  fight  to  the  death  for  it  as  our  natural  right  and  as  our 
moral  right.  But  the  conception  of  private  property  as  the 
means  of  rescuing  mankind  from  a  private  warfare  with  which 
no  government  otherwise  could  cope,  and  as  the  means  of  giving 


18 


and  transfer  utility.  Consumption  utility  puts 
the  owner^  so  to  speak,  into  the  position  of 
Crusoe;  it  opens  for  him  a  psychic  wall  and  en- 
franchises him  with  respect  to  the  utilities  of 
the  material  thing  which  is  the  subject  of  his 
property;  it  enables  him  to  gratify  such  desires 
as  the  material  thing  is  adapted  to  gratify  and 
at  the  same  time  to  gratify  the  very  different 
desire  of  being  free  from  pain  of  conscience  and 
from  suffering  and  fear  of  suffering  at  the  hands 
of  other  men;  it  is  complex,  all  items  of  property 
having  in  common  the  utility  of  enfranchisement 
to  a  greater  or  less  degree,  and  each  having  dis- 
tinctive and  peculiar  material  utilities;  it  can  be 
taken  advantage  of  at  any  time,  and  from  time  to 
time  so  long  as  the  owner's  title  and  the  material 
thing  continue  to  co-exist.  On  the  other  hand, 
transfer  utility  enables  the  owner  in  the  alterna- 
tive either,  by  gift,  to  gratify  his  altruistic  desires 
for  the  welfare  of  family,  friends,  fellow-country- 
men, mankind,  or,  by  exchange,  to  gratify  his 
desire  for  some  other  item  of  property  which  he 
wants  either  for  its  consumption  utility  or  for  its 
transfer  utility;  it  can  be  taken  advantage  of  only 
in  one  way  and  at  a  single  instant  of  time, 
namely,  by  an  act,  and  at  the  time,  of  transfer.  In 
short,  the  two  utilities  minister  to  radically 
different  human  desires  and  they  are  inconsistent, 
in  the  sense  that  it  is  impossible  for  the  owner 
to  take  advantage  of  both  at  the  same  time. 

It  thus  appears  that  there  are  two  entirely  dis- 
tinct standards  for  measuring  a  bargain,  and  that 
one  or  the  other  is  likely  to  be  used  by  a  trader 

to  all  men  a  reasonable  measure  of  liberty,  a  reasonable  measure 
of  contract  bondage,  a  reasonable  measure  of  equality,  and  a 
reasonable  measure  of  economac  efficiency,  and  as  the  means  of 
preserving  for  mankind  many  useful  natural  resources,  such,  for 
example,  as  the  fur  seal,  is  not  germane  to  the  question  now 
under  consideration. 


19 

according  to  the  desire,  or  set  of  desires,  which 
predominates  in  determining  his  volition  to  trade. 
If  he  uses  the  standard  of  consumption  utility, 
he  must  gain,  or  think  that  he  will  gain,  in  the 
matter  of  consumption  utility;  he  will  not  trade 
if  he  thinks  that,  in  that  respect,  he  will  be  either 
worse  off  or  merely  equally  well  off.  So,  if  he 
uses  the  standard  of  transfer  utility,  he  must 
gain,  or  think  that  he  will  gain,  in  that  respect; 
he  will  not  trade  if  he  thinks  that,  in  the  matter 
of  transfer  utility,  he  will  be  worse  off,  or  merely 
equally  well  off.  If  one  of  the  parties  to  a  bar- 
gain uses  the  consumption  standard,  and  the  other 
party  uses  the  transfer  standard,  each  gains,  or 
thinks  he  gains,  by  his  own  standard;  this  is  the 
case  of  the  bargains  made  between  intermediate 
producers  in  the  regular  course  of  industry,  and 
particularly  is  it  the  case  of  the  bargains  made 
between  final  producers  and  consumers.  If  both 
parties  to  a  bargain  use  the  standard  of  transfer 
utility,  each  thinks  he  gains  in  that  respect,  and 
in  all  probability  the  judgment  of  one  is  right 
and  of  the  other  wrong;  this  is  the  usual  case  in 
speculative  bargains  on  the  market  and  a  frequent 
case  in  investment  bargains,  each  party  thinking 
that  he  is  getting  the  better  of  the  bargain,  one 
actually  doing  so,  and  the  other  in  fact  getting 
the  worse  of  it.  If  both  parties  to  a  bargain  use 
the  consumption  standard,  each  thinks  he  gains 
in  respect  of  the  kind  of  material  utility  which 
he  wants,  and  it  is  a  matter  of  mere  chance  how 
the  bargain  results  in  respect  of  transfer  utility; 
for  example,  in  a  barter  of  food  for  clothes,  one 
trader  gives  up  food  which  he  does  not  want  to  eat 
for  clothes  which  he  does  want  to  wear,  and  the 
other  trader  gives  up  clothes  which  he  does  not 
want  to  w^ear  for  food  which  he  does  want  to  eat, 
and  both  gain  in  consumption  utility;  that  is  to 


20 

saj,  by  this  standard  each  is  better  off  as  the 
result  of  the  bargain,  not  worse  off,  or  merely 
equally  well  off,  and  by  the  transfer  standard  one 
is  probably  better  off  and  the  other  worse  off. 

Utilities  are  merely  convenient  abstractions  of 
the  qualities  or  attributes  of  entities  or  things. 
What  are  the  elements  of  property,  or  combina- 
tions of  elements,  of  which  consumption  utility 
and  transfer  utility  are  the  attributes?  It  is 
evident  that  the  alienability  of  the  exclusive 
rights  of  the  owner  of  property  adds  nothing  to 
the  consumption  utility  of  the  property.  We 
may,  therefore,  when  thinking  of  consumption 
utility,  exclude  the  idea  of  alienability.  Such 
exclusion  necessarily  carries  with  it  the  idea  of 
property  power.  The  useful  material  thing,  the 
free  and  exclusive  right,  and  the  security  of  the 
right,  are  plainly  essential  to  consumption  utility. 
We  may  say,  therefore,  that  consumption  utility 
is  the  attribute  of  property  conceived  of  as  the 
free  and  secure  exclusive  right  to  the  use  of  a 
material  thing  for  all  purposes  to  which  the 
material  thing,  as  such,  is  adapted.  All  items  of 
property  may  be  deemed  equal  in  respect  of  free- 
dom and  security,  and  therefore  (for  the  purpose 
of  getting  a  measure)  we  may  eliminate  those 
ideas  and  say  that  a  measure  by  a  proper  stand- 
ard of  the  availability  of  the  material  thing  for 
any  one  use  to  which  the  material  thing,  as  such, 
is  adapted,  is  a  proper  measure  (or  the  value)  of 
the  property  for  that  one  purpose.  Property  thus, 
in  respect  of  its  consumption  utility,  has  as  many 
values  as  the  material  thing  which  is  the  subject 
of  the  property  has  uses.  Transfer  utility  plainly 
requires  alienability  to  be  added  to  the  elements 
which  go  to  make  up  consumption  utility.  The 
conception  includes  all  the  material  uses  and 
values    of    property    and    also    the    security    and 


21 

enfmnchisement  elements  of  consumption  utility, 
but  deals  with  the  whole  in  its  relation  to  pur- 
poses which  cannot  be  served  by  the  material 
thing  alone,  namely ; — the  availability  of  the  whole 
for  the  purpose  of  gratifying  the  desires  which 
can  be  gratified  by  a  gift  of  the  property  or  by 
an  exchange  of  it  for  other  property.  Now, 
property  power  being  the  result  or  effect  (analo- 
gous to  an  induced  current  of  electricity)  of  all 
the  other  elements  of  property,  it  may  be  taken  as 
the  representative  of  those  other  elements,  and, 
therefore,  we  may  conceive  of  transfer  utility  as 
the  attribute  of  property  power ;  hence,  a  measure- 
ment of  property  power  by  a  proper  standard  is 
the  value  of  the  property  for  the  purpose  of  gift 
or  exchange. 

The  main  question  under  consideration  may 
now  be  restated  thus; — Is  the  result  of  a  bargain 
an  increase  or  diminution  of  each  trader's  prop- 
erty power,  or  is  his  property  power  after  the 
bargain  just  equal  in  quantity  to  wliat  it  was 
before  the  bargain?  From  the  foregoing  analyses 
we  may  infer  that  the  true  answer  to  the  question 
is  as  follows; — 

First:  Whenever  both  parties  to  a  bargain 
use  the  standard  of  consumption  utility  it  will  be 
a  mere  matter  of  chance  whether  the  bargain, 
when  remeasured  by  the  standard  of  transfer 
utility,  is  seen  to  have  resulted  in  equality  or 
inequality.  The  chances  are  infinitely  great  that 
the  bargain  will  have  been  struck  at  one  of  the  in- 
numerable points  of  inequality,  so  that  one  party 
will  have  gained  and  the  other  will  have  lost  in 
property  power,  rather  than  at  the  single  point 
of  equality. 

SecMnd:  When  both  parties  use  the  transfer 
standard,  one  will  err  in  judgment  and  lose  in 
property  power  and  the  other  will   be  right   in 


22 


judgment  and  gain  in  property  power,  except  in 
the  highly  improbable  contingency  of  a  joint 
error,  in  which  case  there  would  be  neither  gain 
nor  loss  in  property  power  by  either  party,  i.e., 
there  would  be  equality. 

Thir-d:  If  one  party  uses  the  consumption 
standard  and  the  other  the  transfer  standard,  the 
latter  will  gain  in  property  power  unless  he  makes 
a  mistake  of  judgment,  in  which  case  the  result 
as  to  him  will  be  what  it  plainly  will  be  with  res- 
pect to  the  other  party,  a  mere  matter  of  chance, 
with  the  chances  in  favor  of  inequality. 

III.  The  Margin  of  Chmice.  It  is  evident  that 
unless  traders  measure  their  bargains  accurately, 
it  is  a  matter  of  chance  whether  the  bargains  are 
equal  or  unequal,  with  the  chances  in  favor  of  in- 
equality, and  that  the  more  inaccurate  the  mea- 
surements are,  the  greater  the  chance  that  the 
departure  from  equality  will  be  substantial.  From 
this  basis  we  may  argue  as  follows; — 

First:  The  measurement  of  a  bargain  is  a 
reasoning  process.  The  human  reasoning  faculty 
cannot  work  unless,  at  some  point  or  other,  it  is 
footed  and  fulcrumed  on  a  creed  which  the  rea- 
son is  incompetent  to  prove  but  must  take  for 
granted.  One  article  of  the  creed  is  that  the 
material  universe  is  governed  by  natural  laws, 
so  that,  if  we  can  but  discover  any  such  law, 
we  shall  be  able  to  gain  thereby  a  clear,  exact 
and  definite  knowledge  of  so  much  of  the  material 
universe  as  the  law  applies  to.  Hence,  if  we 
look  at  property  power  in  the  wuj  that,  under 
the  name  of  value,  many  economists  do  look  at  it, 
namely; —  as  a  quality  or  attribute  of  material 
things,  or  as  a  force  inherent  in  material  things, 
we  do  not  despair  of  being  able,  by  search,  to  find 
out  the  natural  law  that  governs  it,  and  by  help 


23 


of  the  law,  to  measure  it  with  great  precisioD,  ju&t 
as  we  measure  the  weight  of  material  things  with 
great  precision.  But  if,  by  analysis  and  study, 
we  have  become  satisfied,  as  is  now  assumed,  that 
property  power  or  value  is  a  psychic  force  inher- 
ent in  the  personality  of  the  owner  of  property, 
we  find  ourselves  face  to  face  with  (another  arti- 
cle of  the  creed.  Whatever  philosophic  or  contem- 
plative doubts,  of  minds  adrift  and  compassless, 
there  may  be,  we  nevertheless  believe,  and,  by 
our  conduct,  universally  show  that  we  believe,  in 
freedom  of  the  will.  The  volitions  which  result 
in  bargains,  or  in  any  form  of  economic  or  other 
activity,  are,  to  an  undefined  extent,  outside  the 
realm  of  natural  law.  We  may  take  it,  therefore, 
that  no  measure  of  property  power  or  value  which 
is  made,  or  can  be  made,  by  the  judgment  of  a 
trader,  or  of  an  economist,  or  of  anybody  else, 
is  accurate  in  the  sense  in  which  our  measure- 
ments of  the  volume  and  density  of  material  things, 
or  of  the  intensity  of  physical  forces,  is  accurate. 
Those  who  assert  that  all  business  is  gambling 
merely  misconceive  the  essence  of  gambling;  they 
are  right  in  supposing  that  all  business  involves 
the  taking  of  risks.  Some  margin  for  the  play 
of  chance  there  is  in  all  trading.^ 

iThe  first  sentence  of  Professor  J.  B.  Clark's  Essentials  of 
Economic  Theory  is; — "The  creation  and  the  use  of  wealth  are 
everywhere  governed  by  natural  laws,  and  these,  as  discovered 
and  stated,  constitute  the  science  of  economics."  This  sentence 
is  a  perfect  illustration  of  the  extreme  difficulty,  and  practical 
dmpossiibiility,  of  so  using  words  as  to  express  but  one  definite 
meaning.  The  sentence  may  mean  that  the  economic  activity 
of  men  is  limited  by  natural  laws,  as  the  activity  of  a  horse  out 
at  grass  is  limited  by  the  fence  of  his  pasture;  in  this  sense  the 
sentence  is,  of  course,  true.  But  it  may  mean  that  economic 
activity  has  no  free  play  at  all;  in  this  sense  does  anybody 
believe  it  to  be  true?  Professor  Clark  makes  a  valid  and 
beautiful  discritmination  between  Capital  goods,  material  things 
the  function  of  which  is  not  to  minister  directly  to  consumers' 


24 


Second:  Traders,  in  closing  bargains,  are 
nearly  always  under  the  influence  of  some  strong 
feeling,  need  or  desire.  Such  influences  inevitably 
bias  the  judgment  and  tend  to  make  it  inaccurate 
to  a  substantial  degree. 

Third:  The  standard  commonly  used  in  bar- 
gains for  measuring  value  or  property  power  is 
gold  coin.  This  standard  is  not  an  accurate 
standard,  like  the  yard  stick  or  the  pound  weight 
of  iron.  It  is  a  variable  standard,  like  the  com- 
pass, but,  unlike  the  compass,  it  does  not  vary 
according  to  law.  The  property  power  incident 
to  the  ownership  of  coin  varies  according  to  the 

wants,  but  to  'help  in  making  things  which  do  this,  and  Capital 
itself,  which  is  a  permanent  fund,  or  continuous  stream  or 
procession,  of  such  material  things.  He  likens  Capital  to  a 
waterfall,  and  Capital  goods  to  the  ever  changing  drops  of  water 
in  the  waterfall.  This  discrimination  easily  leads  to  another. 
From  the  economic  point  of  view  the  abiding  thing  in  the 
iwaterfall  is  the  power,  the  water  power;  so,  in  Capital,  the 
abiding  thing  is  the  power,  the  property  power.  Here  we  must 
become  cautious.  The  water  power  is  entirely,  and  always, 
subject  to  natural  laws;  but  is  the  property  power  always,  and 
entirely,  subject  to  natural  laws?  Or  is  there  not,  within  the 
limits  of  natural  laws,  a  considerable  freedom  of  play?  Should 
men,  working  and  trading,  be  thought  of  as  ruled  by  instinct, 
like  bees  and  ants?  Or  should  they  be  thought  of  as  conscious, 
free  and  enring  workers  and  traders? 

Professor  Qark,  at  page  i8  of  the  Essentials,  gives  a  question- 
able imaginary  example  from  supposed  primitive  life  of  how  it  is 
that  men  in  modern  industry,  who  spend  their  time  in  making 
and  repairing  tools  and  other  Capital  goods,  get  their  food 
without  waiting  for  it ;  and,  at  the  same  time,  he  gives,  uncon- 
sciously, an  excellent  illustration  of  the  domination  over  his 
mind  of  the  bee-and-ant  idea.  He  says; — "Five  men  may 
do  nothing  but  fish,  while  a  sixth  keeps  their  stock  of  canoes 
intact,  by  repairing  old  ones  left  on  the  shore  and  making  new 
ones  to  replace  such  as  are  beyond  repairing.  Fishing  and 
boat  building  may  go  on  simultaneously,  and  all  the  men  may 
go  share  and  share  in  each  day's  catch.  This  is  a  type  of  what 
goes  on  in  modern  industry,  where  a  complex  stock  of  Capital 
goods  always  exists  and  is  kept  intact  by  the  action  of  a  class 
of  persons  who  share  the  returns  that  come  from  using  the  stock. 
None  of  these  persons  has  to  wait  for  food,  although  some  of 
them  devote  themselves  exclusively  to  the  production  of  tools.*' 


25 

mere  moods  of  people  to  an  astonishing  degree. 
During  periods  of  expanding  credit,  when  every- 
body is  hopeful,  optimistic,  buoyant  and  trustful, 
substitutes  for  gold  coin,  such  as  checks  and  bills 
of  exchange,  and  credit  entries  in  bankers'  books 
of  account,  are  readily  accepted  and  used  in 
place  of  coin,  land  the  result  is  similar  to  what 
it  would  be  if  the  stock  of  gold  were  rapidly  and 
very  largely  increased,  that  is  to  say; —  the  prop- 
erty power  of  the  owners  of  coin  becomes  largely 
less,  and,  at  the  same  time,  the  property  power 
of  the  owners  of  other  kinds  of  property,  relative- 
ly to  property  in  gold,  becomes  markedly  in- 
creased in  amount.  On  the  other  hand,  when  the 
feelings  of  people  change,  and  they  become  timid, 
depressed,  pessimistic,  suspicious,  the  substitutes 
for  coin  are  refused,  with  the  result  that  the  prop- 
erty power  incident  to  the  ownership  of  coin  in- 
creases with  great  rapidity,  and  the  property 
power  incident  to  the  ownership  of  other  kinds 
of  property,  relatively  to  gold,  decreases,  just  as 
would  be  the  case  if  the  currency  in  circulation 
were  abruptly  reduced  by  la  large  fraction.  The 
true  reason  for  considering  gold  the  best  standard 
of  value  is  not  because  it  is  a  good  standard,  but 

What  makes  those  fishers  and  that  boat  tinker  act  in  that  way? 
Is  it  instinct?  Is  it  not  rather  a  conscious  prearrangement  and 
agreement  upon  which  each  of  them  relies  and  which,  therefore, 
becomes  the  principle  of  their  organization  and  the  cause  why 
the  boat  tinker  and  each  fisher  gets  a  share  of  each  day's  catch 
of  fish?  If  the  answer  be  yes,  then  is  it  true  that  the  example 
-is  a  type  of  what  goes  on  in  modern  industry?  Is  the  cause  why 
the  modern  tool  maker  gets  food  without  waiting  a  sharing  in 
the  returns  that  come  from  using  the  tools?  Is  there  ordinarily, 
in  modern  industry,  any  conscious  prearrangement  or  agreement 
for  shares  of  the  produce?  Xs  there  not  an  entirely  diflferent 
prearrangement  which  is  the  real  cause  why  tool  makers  get 
their  daily  iood?  Shares  of  produce!  That  is  the  conception 
of  which  is  writer  is  suspicious,  and  against  which  he  is  tempted 
to  prefer  a  charge  of  high  treason  to  the  cause  of  truth. 


26: 

because  it  is  less  bad  than  any  other.  Any  claim 
of  substantial  accuracy  of  measurement,  when 
such  a  standard  is  used,  seems  plainly  untenable. 

Fourth:  One  way  in  which  the  gold  standard 
of  measurement  is  commonly  used  is  the  treatment 
of  the  quotations  of  actual  sales  of  different  par- 
cels of  homogeneous  properties  (such  as  cotton, 
wheat,  shares  of  corporate  stock,  &c.,  &c.)  as  an 
index  or  gauge  of  the  amount  of  property  power 
or  value  w^hich  the  ownership  of  a  unit  of  any 
suck  homogeneous  properties  gives  its  owner  at  any 
instant  of  time.  This  subject  has  received  great 
attention  from  economists,  from  the  point  of 
view  of  property  power  or  value  being  an  attribute 
of  material  things,  or  a  force  inherent  in  material 
things,  and  they  believe  that  they  have  discovered 
a  series  of  natunal  laws  governing  tlie  matter,  and 
these  laws  they  lay  down  with  almost  mathemati- 
cal precision  and  with  a  hypnotizing  confidence 
of  expression.  Let  us  examine  one  of  these  sup- 
posed natural  laws — the  so-oalled  first  law  of  the 
market.  This  law  is  thus  stated  (except  as  to  the 
italics)  by  Professor  Carver  (Distribution  of 
Wealthy  page  5) ; — 

"To  be  sure,  if  the  units  are  all  alike,  or 
so  nearly  alike  as  to  serve  the  buyer's  purpose 
equally  well,  they  will  all  have  the  same  price 
at  the  same  time  and  place.  Obviously,  no 
buyer  would  pay  more  for  one  unit  than  he 
would  have  to  pay  for  another  if  he  knew 
that  the  cheaper  unit  would  serve  his  pur- 
pose just  as  well.  This  is  what  Marshall  has 
called  the  first  law  of  the  market.  Since  all 
units  of  such  a  commodity  have  the  same  price, 
and  since  the  price  of  any  is  a  gauge  of  the 
price  of  every  other^  it  is  customary  to  speak 
of  the  price  of  the  commodity  without  naming 
its    units." 

There   is   an   implication   here  that   a  trader's 


27 

conduct  in  closing  a  bargain  is  guided  by  knowl- 
edge which  it  is  impossible  for  him  to  have.     Bar- 
gains take  effect  at  an  instant  of  time   (literally 
a   miathematical   point   of   time),    but   it   takes   a 
period  of  time  of  appreciable   duration  to  nego- 
tiate and  close  them.     If  the  traders  are  brokers 
with  full  discretionary  authority,  and  the  trading 
is  done  on  the  floor  of  the  most  perfectly  organized 
exchiange,  two  or  three  seconds,  at  least,  are  re- 
quired   for    the    negotiation;    and    if    the   agents, 
not  having  full  authority,  mu^t  communicate  with 
their   principals    and   get   fresh    instructions,   by 
leaving  the  floor  of  the  exchange  and  going  out- 
side to  talk  with  the  principals,  or  by  telephon- 
ing, or  telegnaphing,  or  writing  to  them,  or  if  the 
transaction  is  closed  betw^een  the  principals  them- 
selves off  the  floor  of  the  exchange,  a  considerably 
longer  time   is   required.     During   the  period  of 
negotiation,   some   time   before  its  close,   the   in- 
fluence of  competition  comes  to  an  abrupt  end ;  the 
attention   of   the  two  traders,   parties   to  a   bar- 
gain, is  intensely  concentrated  on  what  they  are 
doing;  for  that  moment  they  are  blind  and  deaf 
to  everything  else   that  is  then   going  on  in  the 
W'Orld.     When  buyer  and  seller  in  group  number 
one  are  closing  a  bargain,  the  buyer  cannot  know 
what  the  seller  in  group  number  two,  or  the  seller 
in  group  number  three,  or  the  seller  in  any  other 
group,  is   at  that  moment  willing  to  do.     Each 
dealer  must  decide  and  act  on  his  knowledge  of 
the  past,  not  on  any  knowledge  which  it  is  possible 
for  him  to  have  of  the  present,  and  there  is  no 
ground  for  believing  that  the  most  complete  knowl- 
edge of  the  past  will  bring  the  minds  of  different 
traders  to  the  same  point.       In  any  market  whose  or- 
ganization permits  more  than  one  sale  lat  a  time 
there  are  as  many   possible  prices   at   the  same 
time  for  different  units  of  homogeneous  properties 


28 

as  there  are  possible  groups  of  dealers,  each 
group  containing  one  buyer  and  one  seller.  What 
took  place  in  the  New  York  Stock  Exchange  at 
the  moment  of  opening  business  on  Tuesday,  Janu- 
ary 5,  1909,  tais  narrated  in  the  following  report 
of  it  in  the  New  York  Sun  of  January  6,  1909,  is 
only  what,  antecedently,  might  have  been  ex- 
pected ; — 

^^It  wa«  a  foregone  conclusion  after  the 
break  in  Consolidated  Gas  on  Monday  that  the 
stock  should  be  the  centre  of  interest  at  the 
opening  of  yesterday's  market,  but  it  is  doubt- 
ful if  miany  persons  were  prepared  for  what 
actually  happened.  For  several  minutes  be- 
fore business  opened  the  Gas  post  was  sur- 
rounded by  a  large  crowd  of  brokers,  nearly 
all  of  whom  held  selling  orders,  each  anxious 
to  execute  his  commission  as  soon  as  possible 
in  the  fear  that  the  price  would  not  long  re- 
main lat  one  figure  and  that  even  a  second  or 
two  of  hesitation  might  mean  considerable 
loss.  This  eager  desire  to  be  first  resulted  in 
the  making  of  a  number  of  sales  simultaneous- 
ly at  prices  running  from  140  to  1381/2,  a 
decline  over  night  of  from  a  point  to  2% 
points,  the  amount  of  stock  represented  in 
these  simultaneous  transactions  reaching  the 
aggregate  of  3,500  shares.  The  highest  figure 
at  the  opening  was  not  paid  again  all  day 
and  even  after  further  heavy  declines  the 
stock  showed  little  or  no  rallying  power." 

It  is  true  that  market  quotations  furnish  a  basis, 
for  some  conduct  in  dealing  which  can  properly 
be  regarded  as  the  taking  of  a  reasonable  risk, 
rather  than  a  gambling  risk;  but,  what  conduct? 
If  you  mean  ,to  buy  or  sell  only  a  few  units, 
say  one  or  two  hundred  shares  of  stock,  you  will 
incur  some  risk,  but  doubtless  not  an  unreasonable 
risk,  if,  on  the  basis  of  the  latest  quotations,  you 
give  an  order  to  your  broker  to  buy  or  sell  ^'at  the 
market."  But  it  would  be  wild  folly  for  you  to  give 


29 

an  order  for  a  huDdred  thousand  shiares  upon  the 
assumption  that  the  statement  of  the  first  law  of 
the  market  that  the  price  of  any  unit  is  a  gauge 
of  the  price  of  every  other,  is  true.  It  is  evident 
that  the  weight  of  a  unit  of  a  homogeneous 
mass  is  equal  to  the  weight  of  each  and  every 
other  unit,  and  that  a  summation  of  the  weights 
of  all  the  units  is  the  weight  of  the  mass;  but  it  is 
necessary  to  hesitate  in  assuming  that  the  prop- 
erty power  incident  to  the  ownership  of  any  one 
unit  of  a  homogeneous  commodity  is,  at  any 
instant,  equal  to  the  property  power  which  the 
ownership  of  each  and  every  other  unit  gives  to 
its  owner,  and  that  a  summation  of  the  several 
property  powers  is  the  property  power  of  the  en- 
tire homogeneous  commodity.  It  is  certain  that 
a  unit  of  the  homogeneous  commodity  will  bring 
a  different  price,  if  it  is  the  only  unit  offered, 
from  what  it  will  bring  if  many  units,  or  all  the 
units,  are  offered  at  the  siame  time,  and  it  seems 
quite  clear  that  the  price  for  which  one  dealer, 
or  a  few  dealers,  sell  their  units  at  any  instant 
cannot  be  an  accurate  measure  of  the  property 
power  at  that  instant  either  of  the  units  then 
sold,  or  of  any  of  the  units  not  then  sold,  for  the 
judgment  of  the  owners  of  other  units,  who  do 
not  then  sell  because  they  think  the  price  too  low, 
and  of  other  buyers,  who  do  not  then  buy  because 
they  think  the  price  too  high,  seems  to  be  quite 
as  important  as  the  judgment  of  those  who  then 
actually  sell  their  units.  Furthermore,  the  judg- 
ment of  all  owners  willing  to  sell  at  what  they 
think  the  right  price,  and  of  all  buyers  willing  to 
buy  at  what  they  think  the  right  price,  may  be 
at  fault  on  account  of  the  existence  of  facts 
which  none  of  them,  except  a  few  gamblers  in  am- 
bush, know. 

You  can  know  the  total  amount  of  your  commo- 


30 


dity  in  existence,  say  the  authorized  and  issued 
stock  of  a  corporation,  and  this  knowledge  is  of 
some  help  in  forming  la  judgment,  but  it  is  by 
no  means  certain  to  lead  to  a  true  and  accurate 
judgment.  Unless  you  yourself  are  the  mana- 
ger of  a  pool  which  has  secretly  locked  up  twenty, 
forty,  ninety  per  cent,  of  the  amount  of  your 
commodity  actually  existing,  you  are  not  likely 
to  know  what  quantity  of  the  existing  commodity 
is  free  in  the  market  at  any  time;  and  if  you 
could  know  that,  you  would  still  be  far  from 
having  a  certain  basis  for  judgment.  There  is 
always  a  possible  psychic  excess  of  supply,  of 
indefinite  and  unknowable  amount,  over  the  known 
amount  of  what  actually  exists.  This  excess  is 
a  closely  guarded  secret  in  the  back  of  the  heads 
of  manipulators  and  gamblers,  who  may,  at  any 
time,  bring  it  out  and  sprinkle  or  flood  the  mar- 
ket wdth  it  by  making  short  sales.  Again,  you 
are  little  likely  to  know,  or  to  be  able  to  gauge, 
the  manipulative  processes  of  matched  and  care- 
fully adjusted  purchases  and  sales  by  which  it  is 
easy  for  great  manipulators  and  gamblers  to  give 
an  entirely  false  appearance  to  market  quotations. 
The  trial  of  Morse,  for  breach  of  the  federal 
banking  law,  incidentally  showed  that,  by  these 
processes,  the  price  of  ice  stock  was,  within  a  few 
months,  jacked  up  from  about  twenty-seven  dollars 
a  share  to  about  ninety  dollars  a  share.  As  mat- 
ters stand,  nobody  has  any  assurance  that  there 
are  so  many  as  one  commodiy  in  any  market  the 
quotations  of  which  are  free  from  the  taint  of 
these  processes;  just  as  it  would  be  easy  for  a 
few  counterfeiters,  if  not  interfered  with,  to  cor- 
rupt the  currency,  so,  under  existing  conditions,  it 
is  easy  for  a  few  gamblers  to  corrupt  the  market 
standard  of  value. 

The   most  important   thing  to   be   known    and 


31 

emphasized  labout  markets  is  that  there  is  a  good 
deal  which  cannot  be  known.  The  next  most 
important  thing  is  that  there  is  a  good  deal,  not 
now  known,  which  could,  by  legislation,  if  not 
otherwise,  become  known,  and  which,  if  known, 
would  help  to  save  investors  from  cruelly  biting 
losses. 

Suppose  that  honest  men,  awaking  from  their 
sleep,  w^ere  to  cause  their  influence  to  prevail 
with  legislators  over  the  influence  of  gamblers; 
suppose  that  a  bill  for  the  protection  of  the  mar- 
ket standard  of  value  by  the  severe  penalization 
of  fraudulent  practices  without  doing  damage  to 
legitimate  trade,  were  to  be  drawn,  as  easily 
it  could  be  drawn  ;^  suppose  such  a  bill  to  be  en- 
acted, and  then  enforced  by  prosecuting  officers 
who  know  their  business,  as  the  prosecutor  of 
Morse  knew  his  business;  suppose  all  the  reeking 
fraud  with  which  many  people  believe  a  few 
gamblers  have  saturated  the  markets  of  the  day 
were  thus  to  be  purged  away;  suppose  that  mar- 
ket quotations  were  to  become  in  fact  what  the 
theories  of  economists  assume  them  to  be,  namely ; — 
a  record  of  the  bona  fide  judgments  as  to  the 
value  of  commodities  of  men  honestly  competing 
for  their  several  interests;  suppose  all  these 
things  to  be  done,  what  then?  We  should  have 
a  much  better  standard  for  measuring  property 

i  If  the  intent  which  a  jury  must  find  were  defined  as  intent 
to  corrupt  and  debase  the  market  standard  of  value,  a  dealer  who 
should  make  an  occasional  short  sale,  or  should  make  an  occa- 
sionail  purchase  and  follo(w  it  by  a  prompt  resale,  would  be  in 
no  more  danger  than  everybody  now  is  in  passing  an  occasional 
counterfeit  coin.  Before  a  jury  would  convict  it  would  have  to 
be  satisfied,  by  miany  facts  and  circimistances,  as  the  jury  an  the 
Morse  case  was  satisfied,  that  the  purpose  was  to  cause  the 
published  quotations  of  prices  to  become  a  trap  for  investors. 
On  the  other  hand,  a  statute  defining  the  intent  in  this  way 
would  be  a  whip  of  scorpions  with  which  prosecutors,  like  Mr. 
Stamson,    could    drive   gambling   money    changers   out    of   the 


32 


power  or  value  than  we  have  now;  but,  at  its 
best,  the  market  standiard  would  still  be,  and  for- 
ever must  be,  very  far  indeed  from  having  the 
accuracy  of  our  measures  of  weight  and  spacial 
dimensions;  there  will  always  be  a  wide  margin 
for  the  play  of  chance,  and  within  that  margin 
the  trader  of  brains,  of  knowledge,  of  experience, 
and  of  expertness  will  have  a  marked  advantage 
over  the  stupid,  ignorant,  inexperienced  and  in- 
expert trader. 

Fifth:  With  the  first  law  of  the  market  econ- 
omists use  other  bases  for  their  theories  of  prices 
and  their  determination  of  values  which,  like 
the  first  law,  are  at  least  so  far  unsound  as  to 
make  the  theories  useless  for  the  solution  of  the 
question  now  under  consideration.  One  such  is 
the  idea  that,  besides  being  the  measure  of  value, 
money  is  only,  and  merely,  a  medium  of  exchange, 
so  that  a  series  of  money  transactions  can,  with- 
out error,  be  treated  as  indirect  barters  of  mater- 
ial things.  From  this  footing  a  step  is  made 
to  the  idea  that  laws  of  value  and  price  can  be 
arrived  at  by  confining  attention  to  the  instinctive 
needs  and  demands  for  pleasure  of  the  human 
body,  and  by  studying  the  relation  thereto  of  ma- 
terial things.  It  is  observed  that  the  bodily  needs 
and  desires,  though  recurrent,  are  quickly  satia- 
ble. From  this  narrow  induction  springs  a  law 
of  the  diminishing  utility  of  material  things,  and 
a  curious  and  wonderful  superstructure  of  un- 
convincing a  priori  reasoning  as  to  their  exchange 
values.      But    the    utility    of    property,    as    dis- 

markets,  and  keep  them  out.  The  market  standard  is  now  a 
reoogmized  measure  of  damages  in  the  courts,  and  it  is  also 
frequently  referred  to  in  statutes  for  various  purposes.  For 
example,  in  Section  547  of  the  New  York  Penal  Code,  market 
value  is  made  the  test  for  discriminating  between  the  various 
degrees  of  larceny. 


33 

tinguished  from  tlie  utility  of  material  things, 
is  ignored,  and  the  insatiability  of  the  desires 
which  property,  as  such,  ministers  to,  is  ignored. 
The  desire  of  property  or  of  enrichment  is  con- 
ceived of  by  economists  as  a  desire  for  things-in- 
general,  that  is,  for  material  things-in-general, 
that  is,  for  material  things,  and  therefore,  (they 
seem  to  think)  only  material  things,  and  their 
utilities  in  ministering  to  bodily  needs  and  desires, 
call  for  special  consideration  and  study. 

What  are  the  ignored  desires  which  property, 
as  such,  ministers  to?  Among  them  tare  liberty 
of  many  kinds,  present  assurance  against  the 
tyranny  of  future  bodily  needs,  influence  good  or 
bad  over  other  men,  the  permanent  welfare  of 
wife  and  child,  the  great  happiness  of  making 
others  happy.  Are  these  desires  satiable,  las  hun- 
ger is  satiable?  Do  they  have  no  influence  on 
values  and  prices?  Is  there  any  law  for  exactly 
measuring  their  influence?  Is  it,  indeed,  the  same 
thing  for  the  baker  to  sell  bread  for  money,  part 
of  which  he  is  at  liberty,  if  he  pleases,  to  save 
for  the  gratification  of  these  desires  and  part  use 
for  the  purchase  of  butcher's  meat,  as  it  would  be 
for  him  to  barter  the  bread  directly  for  meat, 
which  he  could  do  nothing  with  except  presently 
eat  it?  Surely  money  is  not  a  mere  medium  of 
exchange.  It  is  property,  and,  as  such,  it  is 
specially  adapted  to  the  gratification  of  a  most 
important  set  of  human  desires  which  cannot 
be  gratified  by  other  forms  of  property,  except  to 
the  extent  that  they  can  first  be  converted  into 
money. 

Such  is  the  case  for  the  inequality  of  bargains, 
as  the  writer  sees  that  case.  There  are  now 
known  various  species  of  time  gains  in  property 
power  or  value;  such  as  those  that  result  from 
the  application  of  one's  own  native  and  purchased 


34 

labor  and  capital  to  tlie  adaptation  of  material 
things  for  use;  such  as  those  that  come  to  a  land- 
owner as  the  result  of  the  expenditure  of  his 
neighbors'  labor  and  capital;  and  such  as  those 
that  come  to  the  owner  of  gold  as  the  result  of 
the  fluctuating  moods  of  men.  Will  not  somebody 
who  knows  come  forward  and  tell  us  what  reasons 
there  are  for  believing  that  there  is  no  genus  of 
instantaneous  gains  and  correlative  losses  for  the 
eye  of  economic  science  to  study? 

In  conclusion,  the  writer  may  be  pardoned  for 
adding  a  short  explanation  of  what  appears  to 
him  to  be  the  vital  theoretic  importance  of  a  cor- 
rect solution  of  the  question  which  has  here,  one- 
sidedly,  been  discussed.  A  fundamental  concep- 
tion of  economics,  so  far  as  that  science  attempts 
to  understand  and  explain  the  activity  of  men 
in  getting  their  living  under  the  existing  regime 
of  civil  government,  private  property  and  ordered 
liberty,  may  be  indicated  by  the  phrases,  first,  pro- 
duction —  then,  distribution  of  produce  among 
the  huynan  agents  in  production  —  then,  consump- 
tion. So,  loving  boys,  with  fallow  passions  and 
souls  unplowed,  sometimes  go  out  in  a  boat  on 
the  water  to  catch  flounders;  they  fill  the  boat, 
row  to  shore,  and  divide  the  fish  into  shares  which 
may  be  equal  or  unequal  as  their  heavenly  har- 
mony of  heart  moves  them;  then  eacli  carries 
his  share  home  and  eats  it,  or  deals  otherwise  with 
it  as  he  pleases;  for  lovers  like  these  no  govern- 
ment, no  law,  no  property,  and  no  need  of  any; — 
an  idyllic   dream  of  anarchy!^     From   this   root 

1  It  is  interesting  to  think  that  all  the  mighty  influence  of  this 
'false  sequence  of  ideas,  dtiring  the  last  sixty  years,  may  have 
had  i'ts  origin  in  the  dream  of  a  generous  and  brilliant,  but  in- 
experienced boy,  J.  S.  'Mill  appears  to  have  laid  his  economic 
foundations,  under  the  guidance  of  his  unwise,  Benthamite 
father,  when  between  thirteen  and  sixteen  years  of  age;  see 
Cannan,  History  of  the  Theories  of  Production  and  Distribu- 


35 

sprouts  the  notion  that  the  requisites  of  produc- 
tion are,  as  some  say,  land  and  labor,  or,  as  others 
say,  land,  labor  and  capital,  or  as  others  say, 
capital,  labor  and  enterprizing.  Another  offshoot 
from  the  same  root  is  the  idea  that  there  is  a  pri- 
mary distribution  of  produce  by  natural  law  into 
such  categories  as, —  Rent,  the  share  of  land- 
owners; Wages,  the  share  of  laborers;  Interest, 
the  share  of  capitalists;  and  Profits,  the  share 
of  entrepreneurs;  and  that  such  primary  distri- 
bution is  followed  by  a  further  distribution 
of  rent  among  individual  land-owners,  of  wages 
among  individual  laborers,  of  interest  among  in- 
dividual capitalists,  and  of  profits  among  indivi- 
dual entrepreneurs.  A  very  large  part  indeed  of 
theoretic  economics  is  devoted  to  these  and  simi- 
lar categories  and  to  the  elaboration  and  formu- 
lation of  the  supposed  natural  laws  which  apply 
to  them.  Now,  to  anybody  who  will  open  his  eyes 
and  see  for  himself,  the  fact  is  manifest  that  land, 
labor,  capital  and  enterprizing  are  requisites  of 
production  only  in  the  material  or  physical  sense, 
that  is  to  say,  in  the  same  sense  in  which  many 
unappropriable  things  (such  as  the  air,  the  sun's 
light  and  heat,  the  forces  of  gravity,  chemical  af- 
finity and  vitality,)  are  requisites  of  production. 
In  quite  a  different  sense  there  is,  in  the  existing 
regime,  another  requisite  of  production,  which  in 
this  relation  is  seldom  emphasized  by  economic 
theorists.  That  requisite  is  property;  you  must 
own  before  you  can  produce,  just  as  you  must  own 
before  you  can  eat.  So,  also,  it  is  manifest  that 
the  title  to  produce  vests  in  the  owners  of  the  land, 
the  buildings,  the  tools,  the  materials  and  the  labor 

Hon,  Second  Edition,  pages  388-390.  It  does  not  seem  ever 
to  have  occurred  to  Mill  to  consider  whether  the  relations  of  men 
to  the  material  world  can  efficiently  be  organized  unless  their 
relations  inter  sese  are  first  in  some  way  adjusted  and  estab- 
lished with  a  considerable  degree  of  firmness. 


36 


which  are  used  in  producing  it,  and  that  those 
owners  are,  not  the  laborer,  but  the  employer-pro- 
ducer who  has  bought  the  labor,  not  the  landlord, 
but  the  tenant-producer  who  has  bought  the  use 
of  the  land,  not  the  capitalist  who  lends  capital, 
but  the  borrower-producer  who  has  bought  the 
use  of  it;  and  that  whatever  distribution  there  is 
among  producers  (using  that  word  in  the  limited 
sense  that  has  been  explained,)  is  determined 
by  their  contracts,  and  not  at  all  by  what  they 
have  done  as  producing  agents;  in  short,  there 
is  ordinarily,  in  the  existing  regime,  no  distri- 
bution of  produce  qua  produce  among  the  human 
agents  in  production.  Produce,  as  it  comes  into 
being,  is  merged  into  the  general  mass  of  property, 
and,  as  a  part  of  the  general  mass,  is  distributed, 
without  any  intermediate  classification,  directly 
among  individual  men,  including  those  who  are 
and  those  who  are  not  agents  in  production,  by 
gift,  by  exchange,  and  by  direct  operation  of 
governmental  law.  Outside  of  accounting  rooms 
and  the  closets  of  scholars  there  is  (with  some 
minor  and  insignificant  exceptions)  no  other  dis- 
tribution than  this.  Hence,  it  is  not  possible  that 
those  parts  of  economic  theory  which  have  been 
referred  to  can  be  a  true  explanation  of  the 
existing  regime,  unless  what  the  theory  supposes 
to  be  done  is  equivalent  to  what  actually  is  done, 
and,  inasmuch  as  the  only  instrumentality  in 
sight  for  working  out  equivalency  is  the  bargain, 
there  can  be  no  equivalency  unless  bargains  are 
equal.  It  seems,  therefore,  that  if  bargains  are 
unequal,  the  bird's-eye  view  or  root  idea  or  fun- 
damental conception  of  the  branch  of  economic 
theory  which  is  concerned  with  the  true  under- 
standing and  explanation  of  the  existing  regime 
is  wrong  and  must  be  changed  to  something  else, 
say,   something   like   this,    namely; — 


37 


Preconception, 

A  state  of  general  economic  unthrift;  first,  anarchy;  then, 
clashing  interests  and  opinions,  bitterness  of  heart,  quarrels, 
homicides,  disorder,  war. 

Conception  of  Existing  Regime. 

A  state  of  mingled  economic  extreme  thrift,  moderate  thrift, 
and  extreme  unthrift;  first,  civil  government,  private  property, 
ordered  liberty ;  then,  peace ;  then,  simultaneously,  on  the  one 
hand  distribution  of  property,  and,  on  the  other  hand,  production 
and   consumption   of   material    things. 

Postconception. 

A  state  of  general  economic  thrift;  problems  for  men  of 
science  who  shall  have  first  truly  explained  the  existing  regime ; — 
What  are  the  causes  of  the  extreme  thrift  and  the  extreme 
unthrift  of  the  existing  regime?  Is  a  false  location  of  the  legal 
boundary  walls  of  property  and  liberty  one  of  the  causes?  Is 
fraudulent  manipulation  of  markets  one  of  the  causes?  By 
what  modification  or  new  combination  and  adjustment  of  the 
primal  forces  of  the  existing  regime  can  general  thrift  be 
promoted?     Firsit,  what?     Then,  what? 

In  this  view  property  stands  at  the  front  of  the 
existing  regime,  a  first  cause,  a  principal  force, 
in  the  organization  and  direction  of  the  economic 
activity  of  men ;  in  the  view  now  prevelant  among 
economic  theorists  it  stands  inconspicuously  in  the 
hackground,  an  effect  or  result  of  economic  activi- 
ty. The  error  in  the  prevalent  view,  if  error  there 
be,  is  of  the  mind-fettering  kind  such  as  fre- 
quently has  blocked  for  a  long  time  the  advance 
of  science.  It  resembles  the  error  which  once  as- 
tronomers made  in  assuming  that  the  earth  is  sta- 
tionary and  that  the  sun  moves  over  it. 

Samuel  B.  Clarke. 
New  York  City,  June  1,  1909. 


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